Origin of the Smartphone

SHOULDERS THAT STEVE STOOD ON

Sept. 12, 2017

TEXT from Mr. Kimberlin’s talk.

When Steve Jobs introduced the iPhone 10 years ago, he called it “The Ultimate Digital Device.” It would put “The Internet in your pocket” — even put “Life your Pocket,’ he said. Since then, the iPhone, has been so successful that many think that Apple invented the Smart phone. But we all know that he stood on some shoulders, right? Like AT&T’s Bell Labs and Motorola. Well…not entirely. For even Motorola and AT&T stood on the shoulders of some giants — just as Steve Jobs did.

Let’s take a brief look at one of them: a tiny giant named Millicom.

When Jobs introduced the iPhone, he said, “Every once in awhile, something comes along that changes everything.” Where did this change come from? What are its origins? Well, Bell Labs did invent mobile in 1924 and the cellular concept in the 1960s and Bell did develop it in late 70s. But Nippon Telegraph and Telephone (NTT) beat them to the market by 4 years, with a cellular service up and running in Tokyo in 1979. BUT…there was one problem…a big problem…their cell phone wasn’t a PORTABLE. It was permanently connected to the car for its power and its transmitter. In other words, it was mobile only in the sense that the autoMOBILE is mobile.

In that problem, Swedish entrepreneur, Jan Stenbeck, saw a major opportunity. He would create a pocket-size cell phone. So he started a company in the US named Millicom and, in Sweden, he converted a mobile dispatch service to the new cellular architecture. In America, Millicom was the only start up licensed by the FCC to demonstrate the viability of cellular (the other two licensees were, no surprise, Motorola and AT&T — the largest company in the world at the time). Here is the vision that Millicom used to take them on: its guiding star, at the birth of cellular, is found in their 1982 Proxy Statement: a “voice and digital, high speed data communications…portable telephone (weighing 1-pound or less)….to interface directly with computers.” In other words, from its inception, Millicom set out to make a VOice and DAta phONE small enough to fit in your pocket.

Steve Jobs would come to call this concept “Life in Your Pocket.” Long before he said that, Millicom was determined to put it there. Their first stab was “adapting” the “Cadillac” of the dispatch mobile phones. John Agar’s history of the cell phone recognized that Millicom adapted a phone made by E.F. Johnson to produce the “first portable cellular phone.” It was a “a radical innovation, as all phones at that time were quite large and could only be mounted in vehicles” — as we saw in Tokyo. A later version of E.F. Johnson’s phone was nick-named ‘the Lunch Box.’ Meanwile, in a commonly held myth, the phone that many people assume was the first cell phone — the cowboy-shaped Motorola “Brick”, would not come out for another 2 years. Though portable, the Brick, like the Johnson mobile was far too heavy and cumbersome for consumers. So Stenbeck pressed ahead for his Pocket phone.

When I discovered Millicom and saw their mock-up prototype of a consumer-friendly, portable phone in June 1982, I calculated the market need for it. If you can believe it, only 8% of the people in the world had a telephone in 1982. For 92% of the world, if you wanted to communicate, you mailed a letter or sent a telegram, you walked, you got in the car, or you rode a horse. That was personal communications in 1982. With only 8% having a phone, I began calling the Millicom dream, “The phone for the rest of the human race.”

The key question: How to pay for all this? The start-up was valued at $131,000. But, like Stenbeck, I saw its potential so I invested and structured a $18 million funding. BUT…I told Stenbeck it was totally dependant on Millicom doing “something big” to attact attention. An entrepreneurial genius, Jan Stenbeck created that “something big” when he set up a joint-venture in England called Racal-Millicom which won a cellular license for the United Kingdom.

Millicom’s 10% royalty in that venture depended, in large part, on turning the prototype Voice and Data pocket phone into a real product. Easier said than done. Working together in 1983, Millicom, E.F. Johnson and Racal tried…and failed after EFJ was acquired by the 132-year old telegraph company — Western Union. Promising salvation with Japanese manufacturing prowess, TOYO stepped up, but they tried…and bailed, seeing the market too small. Showing how desperate he was to save the lucrative 10% royalty, Stenbeck commissioned a venture even smaller than Millicom — a two person start up founded in 1984 to make the one-pound dream.

Finally, in mid-1986, that commissioning paid off as the Pocket Phone emerged from the lab. It “turned the hand-portable into the world’s first pocket-sized cell phone!” Millicom and its shareholders could, at long last, deliver — to both England, for Racal-Millicom and to Sweden — ‘the smallest, lightest, most intelligent phone and the first to fit in a pocket.”. Wildly popular, the Pocket Phone “caused a small sensation in Europe“ as it captured a 25% share of the mobile market in the UK. It was no less than the LEAP to what we think of today as the mobile phone. With its form, function and trailblazing thin shape, it set the standard for the last 30 years of cell phone development. In the following decades, it was imitated in a myriad of styles by countless manufacturers.

Twenty years later, Steve Jobs took the Pocket-Phone many steps further with what he called “The Internet in Your Pocket.” Here again, he stood on some broad shoulders. An early step was the second version of the Pocket phone, the one that had computing smarts. It was hailed by The Daily Telegraph: “the intelligent phone has been launched” on July 13th, 1987 (exactly 20 years before the introduction of the iPhone).

About the same time, also banking on what they hoped would be a popular product — the Voice and Data phone, — Racal Millicom presciently changed its name to VODAFONE. Vodaphone would live up to its name (making mobile history in the process) on December 6, 1992 when the first TEXT message was sent over its cellular network. This message — “Merry Christmas” — was the moment when the cell phone started ‘interfacing directly with computers,” thus making real the last part of the Millicom vision. Since that date, texting has become the most-used mobile application — some 96% of mobile users are texters. In 2016, they sent 8 Trillion of them — NOT including app-to-app text messaging.

There you have it: the beginning of Steve’s “Internet in your pocket.”

These two major features, pocket-size portability and the ability to transmit data wirelessly over cellular networks enabled him to call the iPhone as “The Ultimate Digital Device.” Thanks to the appeal of applications like texting, and the convenience and portability of the Voice and Data phone, the name “Vodafone” became the 5th most valuable brand in the Global 500 — helping the company grew into the world’s 7th most valuable company, by the year 2000.

The power of the Voice and Data phone was finally recognized. The vision of Millicom vindicated. One shoulder was the first pocket phone and the other was the first data-carrying phone network — two primordial foundations for “The Ultimate Digital Device.” Both were first made practical, consumer-friendly and commercial as a result of Millicom creating that “something big” to get funding at the ground.

Of course, we all know, Apple took this all to an entirely new level. Based on two decades of pocket phone innovation and 50 years of computing progress, Apple could package their device with an Operating System, an app ecosystem, an awe-inspiring design and a totally unique business model to create something the world had never seen before. It did change everything. As a result, today, Apple is the #1 most valuable Brand and the #1 most valuable company. It stands Head and Shoulders over every other company — EVER.

Let me conclude with some comments on the ultimate measure of “The Ultimate Digital Device.” According to LF Ericsson, in 2020, 90% of the human race will have a mobile phone. Compare this to when only 8% of the people in the world had any type of phone — at the time when the cell phone industry was born. Per LF Ericsson’s forecast, that percentage will likely be turned upside down — completely inverted — in the next 36 months or so. In other words, soon only 8% of humanity will NOT have a phone. The Voice and Data Phone really was “the phone for the rest of the human race.” It brought connection, commerce, education, entertainment and JOY to billions of people.

Now — just as Steve Jobs stood on the shoulders of Giants, we can stand on his. From that high altitude, we should be able to see the NEXT great innovation “that changes everything.” Let’s go find it.